By Francis Ntow
Accra, June 16, GNA – Professor Olabisi Delebayo Akinkugbe, Purdy Crawford Chair in business law, Dalhousie University, Canada, has called on the African Union (AU) and member States to take immediate action to protect African Multilateral Financial Institutions (AMFIs).
The call is in respect of the observation of the threats to undermining the continent’s financial architecture due to downgrades of its sovereign debts by international rating agencies.
He drew insights from research on a symposium of the African Financial Architecture and African Multilateral Financial Institutions in Context, reiterating the call for reform of the global financial architecture.
This comes on the back of recent Fitch Ratings’ downgrade of the African Export-Import Bank’s (Afreximbank) long-term foreign currency rating from ‘BBB to ‘BBB-’ with a negative outlook.
Prof. Akinkugbe said the downgrade exposed the critical consequences of treating AMFIs as ordinary commercial lenders rather than recognising their Preferred Creditor Status (PCS), which historically had been exempted from debt-restructuring arrangements.
That could affect Ghana, South Sudan, and Zambia in honouring their debt commitments to key institutions like Afreximbank and the Eastern and Southern African Trade and Development Bank (TDB), setting a “dangerous precedent” that could cripple Africa’s development aspirations.
He, therefore, called for treatment that would create a fiscal space for African States to access affordable financing and enable AMFIs to provide alternative development financing that responded to Africa’s economic realities.
“AMFIs understand the economic vulnerability that dominates the financial landscape of African countries and increasingly offer products that respond to the challenges that African states confront,” the Associate Professor of Law explained.
Unlike traditional international lenders, AMFIs offered solutions tailored to African challenges, often providing the most affordable financing option available to financially challenged countries, he stated.
“For nations like Zimbabwe, AMFI financing represents not just the most affordable option but sometimes the only viable alternative due to unfair risk premiums imposed by international markets on African borrowers,” he noted.
“The AMFIs shore up African States’ financial vulnerability in a fast-increasing unfavorable global economy,” he said, warning that their weakening would deepen African dependency on an unfair globa
He said strengthening the African financial architecture was pivotal to the continent’s financial sovereignty and the preservation of diversity in the global financial system.
“The calls for the reform of the global financial architecture remain incomplete without an unfettered recognition of the multilateral and PCS status of AMFIs as co-equals in their own rights,” Prof Akinkugbe said.
GNA
Agnes Boye-Doe